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Lost an Employee Lawsuit? Join the Club

written by: •edited by: Michele McDonough•updated: 8/15/2011

I’ll sue you and win! This is such a common statement business owners and HR managers hear all the time. These unnecessary lawsuits are happening more and more and if you just lost one, I’ll tell you what you did wrong and how to prepare for future suits.

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    Scary Facts

    I must tell you here, I did a Google search (see screenshot to the left) on “employee lawsuit statistics" and the first two hits were from the Equal Employment Opportunity Commission (EEOC)—and they weren’t offering statistics but sticking a big knife in the back of the small business owner. Both hits from the EEOC went on and on about what company was sued and for how much.

    Luckily, I did find a white paper from the Legal Landminers, 2009 Law Changes Could Impact Your Business, which did offer some scary statistics on the number of employee lawsuits.

    According to authors Mary Gorski and Denise Tataryn, “Employee lawsuits have risen 400 percent in the last 20 years," and of those lawsuits 41.5 percent are “private employers with between 15 and 100 employees." Yes, the small business owner is hit again—only this time, those looking to buck the system do make a buck.

    I’m sure some of you are naysayers. “Oh my employees are so happy! I live by Voice of the Employee Surveys. My employees would never sue me."

    Well, good for you, but if you look out the window right now, you’ll see Munchkins and Dorothy and Toto because you are in the Land of Oz. In other words, you aren’t facing reality.

    Don’t believe me? Here are some more facts.

    A Los Angeles Times story in June 2011 recounts how a car wash employee was awarded $80,000 for employer violations and that didn’t include the employer’s legal fees.

    More statistics from authors Gorski and Tataryn say, “If an employment lawsuit goes to trial, plaintiffs (employees) are more likely to win 67 percent of the time in state courts and 63 percent in federal courts."

    In addition, “wrongful termination lawsuits have risen 260 percent" in the past 20 years and the average cost to settle an employee lawsuit for the small business owner in 2006 rose to $310,845. In 2001, the average cost stood at $130,476. That’s a whopping change folks.

    Now you should be scared because the “I’ll sue this organization" threats are real. If you are a horrible employer and breaking employment laws, you deserve these lawsuits. On the other hand, if you are just a small time Joe trying to do your best, only to find yourself on the losing side of an employee lawsuit, what did you do wrong?

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    Education

    Every new entrepreneur or those fresh in the industry of human resources are eager. They want to set up shop and see their departments run smoothly and efficiently. While these things are a must, facing real facts and gaining the required education you need to avoid these lawsuits from employees is not only a good idea—it’s a must do.

    Let me offer an example of an employee nightmare I had.

    In 2008, I hired Pete as an auto technician. I utilized a legal New Mexico job application and job description which asked old Pete if he could perform all the functions of the job. Pete not only assured me he could—he signed all forms saying he could.

    Turns out Pete forgot to mention an old back injury. When a co-worker found him on the ground squealing in pain, not only did I wind up in a lawsuit, Pete also called the EEOC claiming I wouldn’t make appropriate accommodations for him. Remember, any time an employee calls the EEOC, there will be a lengthy investigation that will take up a lot of your time.

    Pete got an attorney to fight for his rights. “They screwed me! They made my back worse! I told them I had a bad back!"

    Turns out that although I had Pete sign the necessary forms before hiring stating he could perform the job functions of an auto technician, the court and legal fees would have gone into the hundreds of thousands. As a small business owner, I couldn’t afford that—let alone a jury award—so I settled with Pete for, well, that’s my business, but it wasn’t pretty. Not to mention, I had the EEOC on my doorstep for two weeks after Pete wasn’t even there making sure I was playing nice and not breaking labor laws. Geez, I’ll always remember Pete (I bet he’s sitting on a beach somewhere).

    If this story sounds similar, or you have one like it, you know employee lawsuits are often won by the employee (read the statistics above in case you forgot) and the employer is stuck shelling out cash—even though they can prove their innocence.

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    Prepare To Be Threatened

    But all is not lost for the small business owner when it comes to the threat of lawsuits, if you are prepared like a boy scout.

    As much as I was disgruntled after my aforementioned Google search, I do recommend you do some research from websites such as the EEOC and the Department of Labor’s Wage and Hour Division. These government agencies set the rules and the standards we, as employers, must stick to and abide by in order to avoid the unwanted lawsuit.

    If your small business can afford it, I also recommend placing a labor law attorney on retainer—especially if you’ve suffered lawsuits in the past and lost.

    Above all, employers need to make sure they follow labor laws and that doesn’t mean what you “think" the laws are—they change all the time. Ignorance is not a legal excuse in a court of law. Attend a seminar, visit your local department of labor and offer up some scenarios, and seek the advice of those setting the laws to ensure you’re protected, or at least so you’re better prepared.

    Dig in and read my post on how to handle an employee lawsuit for a few tips. Believe me; the old saying “I’ve been there and done that" does apply to me as a small business owner so the advice is sound.

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    Lost Lawsuits

    If you’ve already lost the employment lawsuit, are you screwed? That depends on if you want to spend money to appeal the case. If you do feel the employee unfairly won, appealing a lawsuit means more money to your attorney and we all know fast the legal fees can build up.

    If you’ve got hefty pockets and lots of cash flow—go ahead, appeal and I’ll pray for you. On the other hand, you can also learn from the lost lawsuit.

    Instead of throwing in the entrepreneurial towel (or crying in it), gather your lost lawsuit information and find a labor law attorney. Yes this will cost you money but more than likely less than what you paid the ex-employee (who is fishing right now while you’re reading this).

    Tell the attorney you need advice on how to stop this type of lawsuit in the future and barter with him on a bulk cost to review the lawsuit and offer tips and suggestions. Maybe you did do something wrong or perhaps the employee wasn’t treated fairly. Let the attorney’s unbiased eye make the judgment and offer some cold hard advice on any changes you need to make at your workplace.

    Sometimes life just isn’t fair, especially when it comes to the lazy American worker who wants everything for free. As a business owner, you will hire some of these workers from time to time. Your best offense is a good defense so once you pay for that attorney labor law advice, adhere to it. Make sure you understand the importance of documenting employee warnings.

    The worst mistake you can make is skipping the suggestions and carrying on business as usual.

    Got a nightmare employee lawsuit story? Or, have an employee threatening to sue? Drop me a comment below—your input may help other small business owners avoid these disasters which are always expensive.

    Now, my back is hurting from typing here, I wonder if I can sue?

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